-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LkFKtn6U1jugBiVKZPswJu6Ysx5WVLPitB+BjLKw8xY/1ZLhEjiVNmcrQzX37854 fnpM+PhB51HXDxNuIlnX4w== 0001005210-97-000005.txt : 19970513 0001005210-97-000005.hdr.sgml : 19970513 ACCESSION NUMBER: 0001005210-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUBURBAN PROPANE PARTNERS LP CENTRAL INDEX KEY: 0001005210 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [5900] IRS NUMBER: 223410353 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14222 FILM NUMBER: 97600091 BUSINESS ADDRESS: STREET 1: ONE SUBURBAN PLAZA STREET 2: 240 ROUTE 10 WEST CITY: WIPPANY STATE: NJ ZIP: 07981 BUSINESS PHONE: 2018875300 MAIL ADDRESS: STREET 1: ONE SUBURBAN PLZ STREET 2: 240 RTE 10 WEST CITY: WHIPPANY STATE: NJ ZIP: 07981 10-Q 1 10-Q FOR SUBURBAN PROPANE PARTNERS, L.P. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 29, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ______ to ______ Commission File Number: 1-14222 SUBURBAN PROPANE PARTNERS, L.P. ------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 22-3410353 - -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 240 ROUTE 10 WEST, WHIPPANY, NJ 07981 - -------------------------------------------------------------------------------- (Address of principal executive office) (Zip Code) (201) 887-5300 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for each shorter period that the Registrant was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 30, 1997: Suburban Propane Partners, L.P. - 21,562,500 Common Units - 7,163,750 Subordinated Units This Report contains a total of 20 pages. SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES INDEX TO FORM 10-Q Part 1 Financial Information PAGE Item 1 - Financial Statements SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES ------------------------------------------------ Condensed Consolidated Balance Sheets as of March 29, 1997 3 and as of September 28, 1996 Condensed Consolidated Statements of Operations for the three months ended March 29, 1997 and for the six months ended March 29, 1997 4 Condensed Consolidated Statements of Cash Flows for the three months ended March 29, 1997 and for the six months ended March 29, 1997 5 Condensed Consolidated Statement of Partners' Capital for the six months ended March 29, 1997 6 Notes to Condensed Consolidated Financial Statements 7-14 SUBURBAN PROPANE DIVISION OF QUANTUM CHEMICAL CORPORATION --------------------------------------------------------- (PREDECESSOR) ------------- Condensed Consolidated Statements of Operations for the three months ended March 30, 1996 and for the six months ended March 30, 1996 4 Condensed Consolidated Statements of Cash Flows for the three months ended March 30, 1996 and for the six months ended March 30, 1996 5 Notes to Condensed Consolidated Financial Statements 7-14 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 15-18 Part 2 Other Information Item 5 - Other 19 Item 6 - Exhibits and Reports on Form 8-K 19 Signatures 20
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) MARCH 29, SEPTEMBER 28, 1997 1996 --------- --------- ASSETS Current assets: Cash and cash equivalents .................. $ 17,721 $ 18,931 Accounts receivable, less allowance for doubtful accounts of $4,282 and $3,312 in 1997 and 1996, respectively........... 89,522 55,021 Inventories ................................ 30,861 40,173 Prepaid expenses and other current assets .. 6,982 6,567 --------- --------- Total current assets .................. 145,086 120,692 Property, plant and equipment, net .............. 372,595 374,013 Net prepaid pension cost ........................ 48,076 47,514 Goodwill and other intangible assets, net ....... 253,299 255,948 Other assets .................................... 9,316 9,257 --------- --------- Total assets .......................... $ 828,372 $ 807,424 ========= ========= LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable ........................... $ 37,915 $ 40,730 Accrued employment and benefit costs ....... 22,644 25,389 Accrued insurance .......................... 5,280 5,280 Short-term borrowing ....................... 14,000 -- Customer deposits and advances ............. 4,726 8,242 Accrued interest ........................... 8,349 8,222 Other current liabilities .................. 10,596 13,963 --------- --------- Total current liabilities ............. 103,510 101,826 Long-term debt .................................. 428,229 428,229 Postretirement benefits obligation .............. 80,891 81,374 Accrued insurance ............................... 18,190 19,456 Other liabilities ............................... 10,519 11,860 --------- --------- Total liabilities ..................... 641,339 642,745 Partners' capital: Common unitholders ......................... 146,353 129,283 Subordinated unitholder .................... 48,137 40,100 General Partner ............................ 3,800 3,286 Unearned compensation ...................... (11,257) (7,990) --------- --------- Total partners' capital ............... 187,033 164,679 --------- --------- Total liabilities and partners' capital $ 828,372 $ 807,424 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ( in thousands, except per unit amounts) (unaudited) Three Months Ended Six Months Ended March 29, March 30, March 29, March 30, 1997 1996 1997 1996 (Predecessor) (Predecessor) -------- -------- -------- -------- Revenues Propane ................................. $ 260,404 $ 243,853 $ 484,961 $ 414,550 Other ................................... 17,227 16,139 38,698 36,121 -------- -------- -------- -------- 277,631 259,992 523,659 450,671 Costs and expenses Cost of sales ........................... 163,144 143,338 311,238 240,633 Operating ............................... 57,731 55,541 112,456 106,173 Depreciation and amortization ........... 9,188 8,943 18,469 17,659 Selling, general and administrative ..... 8,109 7,318 16,137 14,183 Management fee .......................... 0 515 0 1,290 -------- -------- -------- -------- 238,172 215,655 458,300 379,938 Income before interest expense and income taxes ............................ 39,459 44,337 65,359 70,733 Interest expense, net ........................ 9,115 1,985 17,613 1,985 -------- -------- -------- -------- Income before provision for income taxes .................................... 30,344 42,352 47,746 68,748 Provision for income taxes ................... 63 16,145 127 28,168 -------- -------- -------- -------- Net income .............................. $ 30,281 $ 26,207 $ 47,619 $ 40,580 ======== ======== ======== ======== General Partner's interest in net income ..... $ 606 $ 952 -------- -------- Limited Partners' interest in net income ..... $ 29,675 $ 46,667 ======== ======== Net income per Unit .......................... $ 1.03 $ 1.62 ======== ======== Weighted average number of Units outstanding ............................. 28,726 28,726 -------- --------
The accompanying notes are an integral part of these condensed consolidated financial statements.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) THREE MONTHS ENDED SIX MONTHS ENDED MARCH 29, MARCH 30, MARCH 29, MARCH 30, 1997 1996 1997 1996 (PREDECESSOR) (PREDECESSOR) ---------- ----------- ----------- ----------- Cash flows from operating activities: Net income .....................................$ 30,281 $ 26,207 $ 47,619 $ 40,580 Adjustments to reconcile net income to net cash provided by operations: Depreciation .............................. 7,296 7,186 14,691 14,272 Amortization .............................. 1,892 1,757 3,778 3,387 Gain on disposal of property, plant and equipment ............................... (36) (71) (418) (94) Changes in operating assets and liabilities, net of acquisitions and dispositions: (Increase) decrease in accounts receivable 20,708 15,675 (34,501) (19,791) Decrease in inventories .................. 26,151 14,545 9,312 9,541 (Increase) in prepaid expenses and other current assets ................ (1,235) (3,895) (415) (5,116) Increase (decrease) in accounts payable ... (20,900) 984 (2,815) 9,982 Increase in due to affifliate ............. 0 41,735 0 41,735 Increase (decrease) in accrued employment and benefit costs ............. 181 5,139 (2,427) 2,799 Increase (decrease) in accrued interest ... (7,945) 2,314 127 2,314 (Decrease) in other accrued liabilities ... (3,879) (550) (5,127) (4,281) Other noncurrent assets ........................ (273) (1,427) (621) (1,431) Deferred credits and other noncurrent liabilities ............................. (1,319) (1,244) (4,846) (3,044) --------- --------- --------- --------- Net cash provided by operating activities ....................... 50,922 108,355 24,357 90,853 --------- --------- --------- --------- Cash flows from investing activities: Capital expenditures .......................... (6,726) (5,816) (15,488) (12,224) Acquisitions .................................. (809) (11,575) (1,503) (15,119) Proceeds from sale of property, plant and equipment, net .................. 971 589 3,007 1,149 --------- --------- --------- --------- Net cash used in investing activities (6,564) (16,802) (13,984) (26,194) --------- ---------- --------- --------- Cash flows from financing activities: Cash activity with parent, net ................ 0 (1,078) 0 25,799 Proceeds from debt placement .................. 0 425,000 0 425,000 Proceeds from offering-net .................... 0 413,569 0 413,569 Debt placement and credit agreement expenses ............................. 0 (6,224) 0 (6,224) Cash distribution to General Partner .......... 0 (832,345) 0 (832,345) Short-term borrowings (repayments), net ....... (35,000) 0 14,000 0 Partnership distribution ...................... (10,927) 0 (25,583) 0 --------- --------- --------- --------- Net cash provided by (used in) financing activities ................. (45,927) (1,078) (11,583) 25,799 --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents .................................. (1,569) 90,475 (1,210) 90,458 Cash and cash equivalents at beginning of period ...................................... 19,290 119 18,931 136 --------- --------- --------- --------- Cash and cash equivalents at end of period ...................................... $ 17,721 $ 90,594 $ 17,721 $ 90,594 ========= ========= ========= ========= Supplemental disclosure of cash flow information: Cash paid for interest ......................... $ 16,189 $ -- $ 16,357 $ -- ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (IN THOUSANDS) (UNAUDITED) UNEARNED TOTAL NUMBER OF UNITS GENERAL COMPENSATION PARTNERS' COMMON SUBORDINATED COMMON SUBORDINATED PARTNER RESTRICTED UNITS CAPITAL ------ ------------ ------ ------------ ------- ---------------- ------- Balance at September 28, 1996 ...... 21,562 7,164 $ 129,283 $ 40,100 $ 3,286 $ (7,990) $ 164,679 Additional grants under restricted Unit plan ....................... 3,585 (3,585) Partnership distribution .......... (21,563) (3,582) (438) (25,583) Unamortized restricted Unit compensation .................... 318 318 Net income ........................ -- -- $ 35,048 11,619 952 -- 47,619 ------- -------- -------- -------- -------- ----------- --------- Balance at March 29, 1997 ......... 21,562 7,164 $ 146,353 $ 48,137 $ 3,800 $ (11,257) $ 187,033 ======= ======== ======== ======== ======== =========== =========
The accompanying notes are an integral part of these condensed consolidated financial statements. SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 29, 1997 (DOLLARS IN THOUSANDS) (UNAUDITED) 1. PARTNERSHIP ORGANIZATION AND FORMATION -------------------------------------- Suburban Propane Partners, L.P. (the "Partnership") was formed on December 19, 1995 as a Delaware limited partnership. The Partnership and its subsidiary, Suburban Propane, L.P. (the "Operating Partnership"), were formed to acquire and operate the propane business and assets of the Suburban Propane Division of Quantum Chemical Corporation (the "Predecessor Company"). In addition, Suburban Sales & Service, Inc. (the "Service Company"), a subsidiary of the Operating Partnership, was formed to acquire and operate the service work and appliance and parts sales businesses of the Predecessor Company. The Partnership, the Operating Partnership and the Service Company are collectively referred to hereinafter as the "Partnership Entities". The Partnership Entities commenced operations on March 5, 1996 (the "Closing Date") upon consummation of an initial public offering of 18,750,000 Common Units representing limited partner interests in the Partnership (the "Common Units"), the private placement of $425,000 aggregate principal amount of Senior Notes due 2011 issued by the Operating Partnership (the "Senior Notes") and the transfer of all the propane assets (excluding the net accounts receivable balance) of the Predecessor Company to the Operating Partnership and the Service Company. On March 25, 1996, the underwriters of the Partnership's initial public offering exercised an overallotment option to purchase an additional 2,812,500 Common Units. The Operating Partnership and Service Company are, and the Predecessor Company was, engaged in the retail and wholesale marketing of propane and related appliances and services. Suburban Propane GP, Inc. (the "General Partner") is a wholly-owned subsidiary of Millennium Petrochemicals Inc. formerly Quantum Chemical Corporation ("Millennium Petrochemicals") and serves as the general partner of the Partnership and the Operating Partnership. Both the General Partner and Millennium Petrochemicals are indirect wholly-owned subsidiaries of Millennium Chemicals Inc. ("Millennium"), which was formed as a result of the demerger (spin-off) of Hanson PLC's ("Hanson") chemicals businesses in October 1996. The General Partner holds a 1% general partner interest in the Partnership and a 1.0101% general partner interest in the Operating Partnership. In addition, the General Partner owns a 24.4% limited partner interest in the Partnership. This limited partner interest is evidenced by 7,163,750 Subordinated Units representing limited partner interests in the Partnership. The General Partner has delegated to the Partnership's Board of Supervisors all management powers over the business and affairs of the Partnership Entities that the General Partner possesses under applicable law. 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -------------------------------------------------------------------- Basis of Presentation. The condensed consolidated financial statements include the accounts of the Partnership Entities. All significant intercompany transactions and accounts have been eliminated. The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. They include all adjustments which the Partnership considers necessary for a fair statement of the results for the interim period presented. Such adjustments consisted only of normal recurring items unless otherwise disclosed. These financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 1996, including management's discussion and analysis of financial condition and results of operations contained therein. Due to the seasonal nature of the Partnership's propane business, the results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. Fiscal Period. The Partnership's fiscal periods end on the Saturday nearest the end of the quarter. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents. The Partnership considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of these instruments. Revenue Recognition. Sales of propane are recognized at the time product is shipped or delivered to the customer. Revenue from the sale of propane appliances and equipment is recognized at the time of sale or installation. Revenue from repairs and maintenance is recognized upon completion of the service. Inventories. Inventories are stated at the lower of cost or market. Cost is determined using a weighted average method for propane and a specific identification basis for appliances. Property, Plant and Equipment. Property, plant and equipment are stated at cost. When plant and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in operations. Depreciation of property, plant and equipment is computed using the straight-line method over the estimated service lives which range from three to forty years. Accumulated depreciation at March 29, 1997 and September 28, 1996 was $100,677 and $85,987, respectively. Goodwill and Other Intangible Assets. Goodwill and other intangible assets are comprised of the following at March 29, 1997: Goodwill $265,960 Debt origination costs 6,224 Other, principally noncompete agreements 4,465 ----------- 276,649 Less: Accumulated amortization 23,350 $253,299 Goodwill represents the excess of the purchase price over the fair market value of net assets acquired and is being amortized on a straight-line basis over forty years from the date of acquisition. Debt origination costs represent the costs incurred in connection with the placement of the $425,000 of Senior Notes which is being amortized on a straight-line basis over 15 years. Income Taxes. As discussed in Note 1, the Partnership Entities consist of two limited partnerships, the Partnership and the Operating Partnership, and one corporate entity, the Service Company. For federal and state income tax purposes, the earnings attributed to the Partnership and Operating Partnership are included in the tax returns of the individual partners. As a result, no recognition of income tax expense has been reflected in the Partnership's consolidated financial statements relating to the earnings of the Partnership and Operating Partnership. The earnings attributed to the Service Company are subject to federal and state income taxes. Accordingly, the Partnership's consolidated financial statements reflect income tax expense related to the Service Company's earnings. Net Income Per Unit. Net income per unit is computed by dividing net income, after deducting the General Partner's 2% interest by the weighted average number of outstanding Common Units and Subordinated Units. Reclassifications. Certain prior period balances have been reclassified to conform with the current period presentation. 3. DISTRIBUTIONS OF AVAILABLE CASH ------------------------------- The Partnership will make distributions to its partners 45 days after the end of each fiscal quarter in an aggregate amount equal to its Available Cash for such quarter. Available Cash generally means all cash on hand at the end of the fiscal quarter plus all additional cash on hand as a result of borrowings and purchases of additional limited partner units (APUs) subsequent to the end of such quarter less cash reserves established by the Board of Supervisors in its reasonable discretion for future cash requirements. The Partnership paid the Minimum Quarterly Distributions on all outstanding Common Units for the quarter ended December 28, 1996 on February 11, 1997 which amounted to $10,927. The Partnership did not make a quarterly distribution on its Subordinated Units (which are held by the General Partner) for said fiscal quarter. 4. RELATED PARTY TRANSACTIONS -------------------------- Pursuant to a Computer Services Agreement (the "Services Agreement") dated as of the Closing Date between Millennium Petrochemicals and the Partnership, Millennium Petrochemicals permits the Partnership to utilize Millennium Petrochemicals' mainframe computer for the generation of customer bills, reports and information regarding the Partnership's retail sales. For the six months ended March 29, 1997, the Partnership incurred expenses of $183 under the Services Agreement. Pursuant to the Contribution, Conveyance and Assumption Agreement dated as of March 4, 1996, between Millennium Petrochemicals and the Partnership (the "Contribution Agreement"), Millennium Petrochemicals retained ownership of the Predecessor Company's accounts receivable, net of allowance for doubtful accounts, as of the Closing Date. The Partnership retained from the net proceeds of the Common Unit offering cash in an amount equal to the net book value of such accounts receivable. In accordance with the Contribution Agreement, the Partnership had agreed to collect such accounts receivable on behalf of Millennium Petrochemicals which amounted to $97,700 as of the Closing Date. The operating Partnership satisfied its obligation to Millennium Petrochemicals under the arrangement during the quarter ended June 29, 1996. 5. COMMITMENTS AND CONTINGENCIES ----------------------------- The Partnership leases certain property, plant and equipment for various periods under noncancelable leases. Rental expense under operating leases was $7,388 for the six months ended March 29, 1997. The Partnership is involved in various legal actions which have arisen in the normal course of business including those relating to commercial transactions and product liability. It is the opinion of management, based on the advice of legal counsel, that the ultimate resolution of these matters will not have a material adverse effect on the Partnership's financial position or future results of operations. 6. LONG-TERM DEBT AND BANK CREDIT FACILITIES ----------------------------------------- On the Closing Date, the Operating Partnership issued $425,000 of Senior Notes with an annual interest rate of 7.54%. The Operating Partnership's obligations under the Senior Note Agreement are unsecured and rank on an equal and ratable basis with the Operating Partnership's obligations under the Bank Credit Facilities discussed below. The Senior Notes will mature June 30, 2011, and require semiannual interest payments which commenced June 30, 1996. The Note Agreement requires that the principal be paid in equal annual installments of $42,500 starting June 30, 2002. The Bank Credit Facilities consist of a $100,000 acquisition facility (the "Acquisition Facility") and a $75,000 working capital facility ("the Working Capital Facility"). The Operating Partnership's obligations under the Bank Credit Facilities are unsecured and will rank on an equal and ratable basis with the Operating Partnership's obligations under the Senior Notes. The Bank Credit Facilities bear interest at a rate based upon either LIBOR, Chase Manhattan's (formerly Chemical Bank's) prime rate or the Federal Funds effective rate plus 1/2 of 1% and in each case, plus a margin. In addition, an annual fee (whether or not borrowings occur) is payable quarterly ranging from 0.125% to 0.375% based upon certain financial tests. As of March 29, 1997, such fee was 0.375%. The Working Capital Facility will expire on March 1, 1999. The Acquisition Facility will expire on March 1, 2003. Any loans outstanding under the Acquisition Facility after March 1, 1999 will require equal quarterly principal payments over a four-year period. As of March 29, 1997, the Partnership had outstanding short-term borrowings of $14,000 under the Acquisition Facility. These borrowings were repaid by April 16, 1997. The Senior Note Agreement and Bank Credit Facilities contain various restrictive and affirmative covenants applicable to the Operating Partnership, including (i) maintenance of certain financial tests, (ii) restrictions on the incurrence of additional indebtedness, and (iii) restrictions on certain liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other transactions. 7. UNAUDITED PRO FORMA FINANCIAL INFORMATION ----------------------------------------- The accompanying unaudited pro forma condensed consolidated statements of operations for the three and six months ended March 30, 1996 were derived from the historical statements of operations of the Predecessor Company and the statements for the three and six months ended March 29, 1997 were derived from the condensed consolidated statement of operations of the Partnership. The pro forma condensed consolidated statements of operations were prepared to reflect the effects of Partnership formation as if it had been completed in its entirety as of the beginning of the periods presented. However, these statements do not purport to present the results of operations of the Partnership had the Partnership formation actually been completed as of the beginning of the periods presented. In addition, the pro forma condensed consolidated statements of operations are not necessarily indicative of the results of future operations of the Partnership and should be read in conjunction with the historical condensed consolidated financial statements of the Predecessor Company and the Partnership appearing elsewhere in this Quarterly Report on Form 10-Q.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) Three Months Ended March 29, March 30, 1997 1996 -------- -------- Revenues Propane ........................................... $ 260,404 $ 243,853 Other ............................................. 17,227 16,139 -------- -------- 277,631 259,992 Costs and Expenses Cost of sales ..................................... 163,144 143,338 Operating ......................................... 57,731 55,541 Depreciation and amortization ..................... 9,188 8,943 Selling, general and administrative expenses ...... 8,109 7,318 Management fee .................................... 0 515 -------- -------- 238,172 215,655 Income before interest expenses and income taxes ....... 39,459 44,337 Interest expense, net .................................. 9,115 7,781 -------- -------- Income before provision for income taxes ............... 30,344 36,556 Provision for income taxes ............................. 63 63 -------- -------- Net Income ............................................. $ 30,281 $ 36,493 ======== ======== General Partner's interest in net income ............... $ 606 $ 730 -------- -------- Limited Partners' interest in net income ............... $ 29,675 $ 35,763 ======== ======== Net loss per Unit ...................................... $ 1.03 $ 1.24 ======== ======== Weighted average number of Units outstanding ........... 28,726 28,726 ======== ========
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) Six Months Ended March 29, March 30, 1997 1996 -------- --------- Revenues Propane .................................... $ 484,961 $ 414,550 Other ...................................... 38,698 36,121 ------- ------- 523,659 450,671 Costs and Expenses Cost of sales .............................. 311,238 240,633 Operating .................................. 112,456 106,173 Depreciation and amortization .............. 18,469 17,659 Selling, general and administrative expenses 16,137 14,183 Management fee ............................. 0 1,290 ------- ------- 458,300 379,938 Income before interest expenses and income taxes 65,359 70,733 Interest expense, net ........................... 17,613 16,011 ------- ------- Income before provision for income taxes ........ 47,746 54,722 Provision for income taxes ...................... 127 126 ------- ------- Net income ...................................... $ 47,619 $ 54,596 ======= ======= General Partner's interest in net income ........ $ 952 $ 1,092 ------- ------- Limited Partners' interest in net income ........ $ 46,667 $ 53,504 ======= ======= Net income per Unit ............................. $ 1.62 $ 1.86 ======= ======= Weighted average number of Units outstanding .... 28,726 28,726 ======= =======
7. UNAUDITED PRO FORMA FINANCIAL INFORMATION - CONTINUED ----------------------------------------------------- Significant pro forma adjustments reflected in the above data include the following: a. For the three and six month periods ended March 30, 1996, an adjustment to interest expense to reflect the interest expense associated with the Senior Notes and Bank Credit Facilities. b. For the three and six month periods ended March 30, 1996, the elimination of the provision for income taxes, as income taxes will be borne by the partners and not the Partnership, except for corporate income taxes related to the Service Company. The Partnership's management estimates that the incremental costs of operating as a stand alone entity during the three and six month periods ended March 30, 1996 would approximate the management fee paid to an affiliate of its former Parent Company. These incremental costs are estimated to be $515 and $1,290 for the three and six month periods ended March 30, 1996, respectively. 8. RESTRICTED UNIT PLAN -------------------- The Partnership's 1996 Restricted Unit Award Plan authorizes the issuance of Common Units with an aggregate value of $15,000 to executives, managers and Elected Supervisors of the Partnership. Initial Restricted Unit grants with a total value of $7,990 were awarded effective March 5, 1996 and additional grants with a total value of $3,585 were awarded effective October 1, 1996. Upon issuance of Restricted Units, unearned compensation is amortized ratably over the applicable vesting periods under the Plan. Unamortized unearned compensation was $11,257 at March 29, 1997 and is shown as a reduction of partners' capital in the Partnership's Condensed Consolidated Balance Sheets. 9. SUBSEQUENT EVENT - COMMON UNIT DISTRIBUTION ------------------------------------------- On April 22, 1997, the Partnership announced a quarterly distribution of $0.50 per Limited Partner Common Unit (aggregating $10,926) for the fiscal quarter ended March 29, 1997 payable on May 13, 1997. The Partnership will not make a quarterly distribution on its Subordinated Units (which are held by the General Partner) for said fiscal quarter. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE DISCLOSURE SET FORTH BELOW INCLUDES FORWARD LOOKING STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED HEREIN AS A RESULT OF POSSIBLE VARIATIONS IN PROPANE COSTS, EXPENSE LEVELS AND RETAIL MARKET CONDITIONS FOR PROPANE AS WELL AS OTHER FACTORS. THREE MONTHS ENDED MARCH 29, 1997 - --------------------------------- COMPARED TO THREE MONTHS ENDED MARCH 30, 1996 - --------------------------------------------- REVENUES Revenues increased 6.8% or $17.6 million to $277.6 million for the three months ended March 29, 1997 as compared to $260.0 million for the three months ended March 30, 1996. The overall increase is attributable to higher retail and wholesale selling prices resulting from the increased cost of propane, offset in part by lower retail volumes. Propane sold to retail customers decreased 10.6% or 21.7 million gallons to 183.3 million gallons. The decrease in retail gallons was primarily due to significantly warmer temperatures than in the prior period coupled with customers' energy conservation due to the historically higher level of propane prices. Approximately 55% of the decrease in retail gallons occurred in the Partnership's Southeastern Region which experienced weather which was 26% warmer than the prior period. Temperatures nationally were approximately 11% warmer than in the prior period. Wholesale gallons sold increased 5.4% or 3.8 million gallons to 73.9 million gallons resulting from favorable wholesale sales opportunities arising from the volatility of industry-wide propane prices during the period. GROSS PROFIT Gross profit decreased 1.9% or $2.2 million to $114.5 million. The decrease was primarily a result of lower retail volumes offset in part by overall higher retail margins. Average product costs charged by the Partnership's suppliers increased significantly during the first four months of fiscal 1997 as compared to the prior year attributable to perceived low nationwide propane inventory levels. The product costs began to decline in January as warmer than normal national temperatures resulted in significantly reduced demand. During the three months ended March 29, 1997, the Partnership was able to pass on these product cost increases and maintain higher unit margins than during the prior period. OPERATING EXPENSES Operating expenses increased 3.9% or $2.2 million to $57.7 million for the three months ended March 29, 1997 as compared to $55.5 million for the three months ended March 30, 1996. The increase in operating expenses is due to higher facility and equipment leasing costs, equipment maintenance expenditures and an increase in the allowance for doubtful accounts attributable to the higher selling prices. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses, including the management fee, increased 3.5% or $.3 million to $8.1 million for the three months ended March 29, 1997 compared to $7.8 million for the three months ended March 30, 1996. Expenses were higher than the prior period principally due to higher information system development costs. OPERATING INCOME AND EBITDA Operating income decreased $4.8 million to $39.5 million in the three months ended March 29, 1997 compared to $44.3 million in the prior period. EBITDA decreased $4.6 million to $48.6 million. The decrease is attributable to decreased gross profit principally resulting from lower retail volumes coupled with higher period expenses. EBITDA should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) but provides additional information for evaluating the Partnership's ability to distribute the Minimum Quarterly Distribution. SIX MONTHS ENDED MARCH 29, 1997 - ------------------------------- COMPARED TO SIX MONTHS ENDED MARCH 30, 1996 - ------------------------------------------- REVENUES Revenues increased 16.2% or $73.0 million to $523.7 million for the six months ended March 29, 1997 as compared to $450.7 million for the six months ended March 30, 1996. The overall increase was attributable to higher retail and wholesale selling prices resulting from the increased cost of propane, offset in part by lower retail volumes. Propane sold to retail customers decreased 5.6% or 20.3 million gallons to 342.3 million gallons while wholesale gallons sold increased 16.8% or 20.3 million gallons to 140.9 million gallons. For the period, temperatures nationally were eight percent warmer than during the prior period. The increase in wholesale gallons resulted from favorable wholesale sales opportunities arising from the volatility of industry-wide propane prices during the period. GROSS PROFIT Gross profit increased 1.1% or $2.4 million to $212.4 million. The increase is principally a result of higher retail margins, increased wholesale revenues and higher gross profit from appliance and parts sales offset partially by lower retail volumes. Average product costs for the Partnership increased substantially in the six months ended March 29, 1997 to the same period of the prior year. The product cost increase was principally attributable to significant price increases charged by the Partnership's suppliers during the first four months of the current period. During the six months ended March 29, 1997, the Partnership was able to pass on these product cost increases through higher selling prices and maintain higher unit margins than during the prior period. OPERATING EXPENSES Operating expenses increased 5.9% or $6.3 million to $112.5 million for the six months ended March 29, 1997 as compared to $106.2 million for the six months ended March 30, 1996. The increase in operating expenses was principally due to higher vehicle fuel costs resulting from the increase in propane costs along with higher equipment maintenance, rental expenses and an increase in the allowance for doubtful accounts resulting from the increase in revenues. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses, including the management fee, increased 4.3% or $.7 million to $16.1 million for the six months ended March 29, 1997 compared to $15.5 million for the six months ended March 30, 1996. Expenses were higher than the prior period principally due to higher information system development costs. OPERATING INCOME AND EBITDA Operating income decreased $5.4 million to $65.4 million in the six months ended March 29, 1997 compared to $70.7 million in the prior period. EBITDA decreased $4.6 million to $83.8 million. The decrease is attributable to higher period expenses partially offset by higher gross profit. EBITDA should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) but provides additional information for evaluating the Partnership's ability to distribute the Minimum Quarterly Distribution. LIQUIDITY AND CAPITAL RESOURCES Due to the seasonal nature of the propane business, cash flows from operating activities are greater during the winter and spring seasons as customers pay for propane purchased during the heating season. For the three months ended March 29, 1997, net cash provided by operating activities decreased $57.5 million to $50.9 million compared to $108.4 million in the three months ended March 30, 1996. Cash provided by operations in the prior period included $41.7 million of net cash collected by the Partnership on behalf of Millennium Petrochemicals (classified as due to affiliate, net) under the terms of the Contribution Agreement between Millennium Petrochemicals and the Partnership. Excluding this item, cash provided by operations decreased by $15.8 million in the three months ended March 29, 1997 compared to the prior period. Such decrease was primarily attributable to a $10.2 million increase in accrued interest payments under the Partnership's Senior Notes and a net increase in cash required to fund inventory purchases due to the increased cost of propane. Net cash used in investing activities was $6.6 million for the three months ended March 29, 1997 consisting of capital expenditures of $6.7 million and acquisition payments of $.8 million, offset by proceeds from the sale of property, plant and equipment of $.9 million. Net cash used in investing activities was $16.8 million for the three months ended March 30, 1996 consisting of capital expenditures of $5.8 million and acquisition payments of $11.6 million, offset by proceeds from the sale of property, plant and equipment of $.6 million. Net cash used in financing activities for the three months ended March 29, 1997 was $45.9 million arising from net short-term debt repayments of $35.0 million and the Partnership distribution of $10.9 million. Excluding the $41.7 million of net cash collected on behalf of Millennium Petrochemicals discussed above, cash provided by operating activities for the six months ended March 29, 1997 decreased $24.8 million to $24.4 million compared to $49.2 million in the prior period. The decrease was principally due to higher accounts receivable levels attributable to increased selling prices and an increase in cash required to fund inventory purchases due to the timing of purchases and the increased cost of propane. Net cash used in investing activities was $14.0 million for the six months ended March 29, 1997 consisting of capital expenditures of $15.5 million and acquisition payments of $1.5 million, offset by proceeds from the sale of property, plant and equipment of $3.0 million. Net cash used in investing activities was $26.2 million for the six months ended March 30, 1996 consisting of capital expenditures of $12.2 million and acquisition payments of $15.1 million, offset by proceeds from the sale of property, plant and equipment of $1.1 million. Net cash used in financing activities for the six months ended March 29, 1997 was $11.6 million, principally resulting from the Partnership's distributions of $25.6 million, partially offset by net short-term borrowings of $14.0 million. Prior to March 5, 1996, the Predecessor Company's cash accounts had been managed on a centralized basis by an affiliate of Hanson. Accordingly, cash receipts and disbursements relating to the operations of the Predecessor Company were received or funded by the Hanson affiliate. Net cash activity with parent prior to March 5, 1996 was $1.1 million (paid to the Hanson affiliate) and $25.8 million (received from the Hanson affiliate) for the three and six months ended March 30, 1996, respectively. In March 1996, the Operating Partnership issued $425.0 million aggregate principal amount of Senior Notes with an interest rate of 7.54% for net cash proceeds of $418.8 million. Also, the Partnership, by means of an initial public offering and the exercise of an overallotment option by the underwriters, issued 21,562,500 Common Units for net cash proceeds of $413.6 million. The net proceeds of the Notes and Units issuance (which totaled $832.4 million), less $5.6 million reflecting a closing price adjustment to adjust division invested capital to $623.2 million immediately prior to the Partnership formation and $97.7 million reflecting the retention of the Predecessor Company net accounts receivable by Millennium Petrochemicals, was used to acquire the propane assets from Millennium Petrochemicals, pay off the intercompany payables and make a special distribution to the General Partner. The Partnership is currently evaluating certain long-term cost reduction strategies and organizational changes which it plans to finalize by the conclusion of the quarter ending June 28, 1997. Accordingly, the Partnership expects that these changes will result in a restructuring charge in the range of $4 to $6 million during the third fiscal quarter. As a result of lower than anticipated earnings for fiscal 1997 and the costs associated with the restructuring efforts, the Partnership anticipates that it will utilize a portion of the cash proceeds available under the Distribution Support Agreement between the Partnership and the General Partner to pay the Minimum Quarterly Distribution on the Common Units with respect to the fourth fiscal quarter of 1997. The amount of proceeds under the Distribution Support Agreement which will be utilized in the fourth quarter will be dependent on future operating results for the remainder of fiscal 1997. The Distribution Support Agreement provides for a maximum of approximately $44 million in cash to support the Partnership's Minimum Quarterly Distributions to holders of Common Units through March 31, 2001. The Partnership has not made a distribution on its subordinated units for the first and second fiscal quarters of 1997 and does not intend to make a distribution to the subordinated unitholder for the remainder of fiscal 1997. SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES PART II ITEM 5. OTHER INFORMATION - NONE. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits (27) Financial Data Schedule (B) Form 8-K None SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THE REGISTRANT HAS CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED: SUBURBAN PROPANE PARTNERS, L.P. DATE: MAY 9, 1997 BY /S/ ANTHONY M. SIMONOWICZ -------------------------- ANTHONY M. SIMONOWICZ VICE PRESIDENT, CHIEF FINANCIAL OFFICER BY /S/ EDWARD J. GRABOWIECKI ------------------------- EDWARD J. GRABOWIECKI CONTROLLER AND CHIEF ACCOUNTING OFFICER EX-27 2 FINACIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-Q AND IS QUALIFIED IN IT'S ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS SEP-28-1996 MAR-29-1997 17,721 0 93,804 4,282 30,861 145,086 473,272 100,677 828,372 103,510 428,229 0 0 0 187,033 828,372 523,659 523,659 311,238 423,694 0 4,282 17,613 47,746 127 47,619 0 0 0 47,619 0 0
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